Letter to Santa Claus

A prominent member of the Labour Party has stated, off the record, that the contents of the party’s leaked manifesto is like a letter to Santa Claus. Whoever that Labour Party member is, I’d like to applaud his or her honesty.

I live in South Devon and, in our locality, we have a slurry tanker that collects slurry from farms, septic tanks etc.. On the side of the vehicle, in very bold writing, is the following message, “This Vehicle is Full of Political Promises”.

Irrespective of their political allegiances, many people in this country are absolutely and utterly fed up with political parties making promises that there is never any serious possibility of them keeping. All of the main parties do it; and all it does is to alienate them from the electorate, as our local slurry tanker very effectively demonstrates.

I’m picking on Labour here, not because I’m trying to make a party political point but because they have launched a manifesto, which is quite simply undeliverable. If it was a document outlining a range of aspirations and ideas it would be fine. Indeed, many of the aspirations are very desirable. But it isn’t. It is a list of promises that Labour is committing to deliver if it is elected. Many people will understand that most of these promises cannot be delivered and, for these people, Labour is undermining its own credibility and increasing the disconnect between the political bubble and the electorate. Many others, and particularly the more vulnerable in our society, may believe the promises. But if Labour is elected, these people will feel cheated and let down when the promises are not delivered.

So how can I be so certain that these promises are undeliverable?

The answer is not rocket science. If Labour was to initiate a programme to deliver these promises, a very substantial increase in government spending would be needed. This would require a very substantial increase in the amount of money the government raised through taxation. “Great”, some people will then say, “let’s raise taxes”. But it’s not that simple.

The first problem is that when taxes are increased, the behavior patterns, of those people and organisation that are affected, change; often in ways that are not anticipated. As a result, the amount of additional tax revenue collected is invariably substantially less than that shown in the official projections.

The second problem is that there is an optimum level of tax that an economy can withstand and still continue to grow. Forget who pays what tax. Forget what products and services are or are not taxed. And forget what rates of tax apply. But consider the total amount of tax extracted from the whole economy. There is a tipping point and, if a government goes beyond that tipping point and tries to extract more tax than the economy can withstand, it undermines the growth of that economy and puts it into recession. As the economy shrinks, the total amount of tax generated then falls.

The UK economy is at that tipping point now. Based on the current size of our economy, it is virtually impossible to extract significantly more tax; and if we try to do so, the economy will almost certainly shrink and the amount of tax collected by the exchequer will fall, putting at risk existing funding for the NHS, education, welfare, defence etc..

Managing the economy of a modern Western democracy is incredibly difficult. The challenge faced by the government of the day is to raise the optimum amount of tax that will enable it to get as close as possible to meeting the aspirations of the electorate. But part of this must also be about managing the expectations of the electorate. If the electorate has unrealistic demands it will be demoralised, divided and treat its politicians with contempt. If its demands are more realistic it will be energised, united and treat is politicians with respect.

Sadly, managing the electorate’s expectations is something at which today’s cohort of politicians is not good; and this manifesto from Labour just makes matters worse. It is self-indulgent and will benefit no one. I just hope that there are more politicians in all of the main political parties with the honesty and integrity of the unnamed Labour candidate, who described the Labour manifesto as being like a letter to Santa Claus.